Ohio Valley Banc Corp. Reports 2nd Quarter Earnings

GALLIPOLIS, Ohio—Ohio Valley Banc Corp. [Nasdaq: OVBC] (the “Company”) reported consolidated net income for the quarter ended June 30, 2017, of $1,741,000, an increase of 2.1 percent from the $1,706,000 earned for the second quarter of 2016. Earnings per share for the second quarter of 2017 were $.37 compared to $.41 for the prior year second quarter.

For the six months ended June 30, 2017, net income totaled $4,958,000, a 9.3 percent increase from net income of $4,538,000 for the six months ended June 30, 2016. Earnings per share were $1.06 for the first six months of 2017 versus $1.10 for the first six months of 2016. Return on average assets and return on average equity were .97 percent and 9.40 percent, respectively, for the first half of 2017, compared to 1.05 percent and 9.88 percent, respectively, for the same period in the prior year.

“Two quarters into the new fiscal year and eleven months into the Milton Banking Company merger things are coming together nicely,” stated Thomas E. Wiseman, President and CEO. “Customer response has been positive, loan demand steady and our Community First mission stronger than ever. We are pleased with the second quarter and year-to-date financial results and recognize the outstanding effort put forth by the entire OVBC family.”

For the second quarter of 2017, net interest income increased $1,865,000, and for the six months ended June 30, 2017, net interest income increased $3,630,000 from the same respective periods last year. Positively impacting net interest income was the growth in earning assets. For the six months ended June 30, 2017, average earning assets increased $145 million from the same period the prior year. The growth in average earning assets was attributable to average loans, which increased $152 million. In addition to positive loan growth from existing markets, the growth in loans was supplemented from recent expansion initiatives. During the third quarter of 2016, the Company acquired Milton Bancorp, Inc. (“Milton”), which contributed $106 million to the growth in loans. Furthermore, the Company opened a loan production office in Athens, Ohio in late 2015. Average loans for the Athens location increased $14 million for the first half of 2017, as compared to the same period last year. Adding to the contribution from the growth in earning assets was the increase in the strong net interest margin, or profit margin on earning assets. For the six months ended June 30, 2017, the net interest margin was 4.49 percent, compared to 4.36 percent for the same period the prior year. The improvement in net interest margin was related to higher loan balances relative to total earning assets.

For the three months ended June 30, 2017, the provision for loan losses increased $34,000, and for the six months ended June 30, 2017, the provision for loan losses decreased $300,000, from the same respective periods in 2016. For the six months ended June 30, 2017, net charge-offs totaled $1,067,000, an increase of $733,000 from the same period in 2016. However, the net charge-offs incurred during the first half of 2017 were predominately related to the charge-off of specific allocations on collateral dependent impaired loans, which had already been provided for in the allowance for loan losses. As a result, charge-offs for loans without specific reserves were down from the prior year, which contributed to a decrease in provision for loan losses. The ratio of nonperforming loans to total loans was 1.09 percent at June 30, 2017 compared to 1.26 percent at December 31, 2016 and 1.14 percent at June 30, 2016. Based on the evaluation of the adequacy of the allowance for loan losses, management believes that the allowance for loan losses at June 30, 2017 was adequate and reflects probable incurred losses in the portfolio. The allowance for loan losses was .92 percent of total loans at June 30, 2017, compared to 1.05 percent at December 31, 2016 and 1.15 percent at June 30, 2016.

For the three months ended June 30, 2017, noninterest income totaled $2,112,000, compared to $1,861,000 for the same period last year. Noninterest income totaled $5,225,000 for the six months ended June 30, 2017, as compared to $5,096,000 for the same period last year, an increase of $129,000. The increase in noninterest income was related to the higher deposit base associated with the Milton acquisition. For the first half of 2017, interchange income earned from debit and credit transactions increased $432,000 and service charges on deposit accounts increased $195,000, respectively, from the same period last year. Partially offsetting the increases above was tax refund processing fees. For the first six months of 2017, tax refund processing fees totaled $1,667,000, a decrease of $357,000 from the same period the prior year. The decrease was related to the lower per item fee received by the Company under the contract with the third-party tax refund product provider.

For the three months ended June 30, 2017, noninterest expense totaled $9,876,000, an increase of $2,103,000 from the same period last year. For the six months ended June 30, 2017, noninterest expense totaled $19,251,000, an increase of $3,509,000, or 22.3 percent, from the same period last year. Generally, the acquisition of Milton contributed to an increase in most noninterest expense categories, related to having a larger organization after the merger. The Company’s largest noninterest expense, salaries and employee benefits, increased $617,000 as compared to the second quarter of 2016 and increased $1,411,000 as compared to the first half of 2016. The increase was primarily related to adding Milton employees, annual merit increases, and higher health insurance expense. Also adding to higher noninterest expense was fraud expense. During the second quarter of 2017, management discovered four fraudulent wire transfers associated with a single account relationship totaling $933,000. As of June 30, 2017, management was able to recover $103,000, resulting in a net expense of $830,000. A determination of whether or not existing insurance policies will cover all or part of any such residual loss is still pending. The remaining noninterest expenses increased $1,268,000, led by an increase in data processing, professional fees and expenses associated with facilities.

Ohio Valley Banc Corp. common stock is traded on The NASDAQ Global Market under the symbol OVBC. The holding company owns Ohio Valley Bank, with 19 offices in Ohio and West Virginia, and Loan Central, with six consumer finance offices in Ohio. Learn more about Ohio Valley Banc Corp. at www.ovbc.com.